1.0. Project Title: UPSCALING OF THE HOG PRODUCTION BUSINESS OF NEW TUMAUINI COOPERATIVE AMID THE IMPACT OF GLOBALIZATION

2.0. Project Type: Adoption of Improved Production Facilities and Technologies

3.0. Proponent: 3.1. Type: Farmer’s Cooperative

CDA Registration Number: TUG-2247-XL 3.2. Name: New Tumauini Cooperative (NTC)

3.3. Address: Brgy. Lingaling, Tumauini, Isabela, Region II3325

4.0. Coverage: 4.1. Location:

Office/Marketing Center:

Piggery Project:

Intended Market:

Brgy. Lingaling, Tumauini, Isabela

Barangay Lapogan, Tumauini, Isabela

Farmers, Meat Vendors and Meat Processors in Northern Isabela

4.2. Product: Live Hog

5.0. Duration: 5.1. Pre-Implementation: 3 months

5.2. Implementation: 3 years

6.0. Funding Requirement:

LBP Loan Equity Total

Fixed Investment Land Buildings Feedmilling Equipment, Other facilities/tools Breeder stocks Existing stocks Add’l stocks Cost of producing feeds Total

280,000.00 280,000.001,700,000.00 1,700,000.00

748,550.00 748,550.00

857,886.00 857,886.00 410,000.00 410,000.00 641,450.00 298,550.00 940,000.003,500,000.00 1,436,436.00 4,936,436.00

7.0. Contact Person: 7.1. Name Position: Domingo T. Bacud

Manager, NTC

7.2. Address: Maligaya, Tumauini, Isabela

7.3. Phone Number: 0908-3706023

7.4. E-mail Address: domingo.bacud@yahoo.com

8.0. The Project:

8.1. Justification

Region 02 is one of the top contributors in agriculture GDP especially for rice, corn and livestock. For the year 2007 Cagayan Valley is the second largest producer of rice next only to Central Luzon, the second largest raiser of carabao and the top producer of corn (BAS). However, farmers in the region remain to be poor and marginalized (16.9% poverty incidence for farmers in 2006- NSCB) due to a very low price of their products and to a high cost of production.

Being the top producer of corn with 1.9M metric tons produced in 2008 (BAS), it is hard to rationalize why the region lags behind other regions in terms of hog production (11th among the 16 regions, 4% contribution to the national hog production, BAS) wherein corn is the major ingredient of hog feeds. With this situation, the New Tumauini Cooperative (NTC) endeavors to lessen this gap and tap the vast resources of the region especially its corn which are still being traded to piggery and poultry farm to Bulacan and as far as Batangas and Bicol.

The primary business of NTC, a cooperative duly recognized by the CDA, is hog raising. Currently they are operating a 100 sow level farm which is rented from a businessman who has migrated abroad. The farm is on sale and already has an outstanding offer. With the eventual selling of the farm, the cooperative would be left out with no building for its stock, thus has purchased a land for where to put up its own piggery farm. With funds exhausted from the buying of the land, the coop is now trying to look for external funding to construct its building and purchase the needed equipments.

With the pork market situation of the region, it is imperative for farms to produce its own feeds and take advantage of the relatively cheaper corn in the region. Establishing its own feedmill and artificial insemination in its farm

operations would provide great advantage to NTC especially with the coming of multinational competitors.

Having an efficient operation would not only benefit the cooperative but the general customers as well. Efficient production of farms means better income to meat processors, lower price to costumers and eventually a better local economy. With local farms producing its own feeds, a new marketing option would now be open to corn farmers, increasing their bargaining power and ultimately increasing the price of their products.

8.2. Project DescriptionThe project involves up-scaling of the piggery project of the New Tumauini

Cooperative (NTC) through establishment of state of the art building and facilities, introduction of Purebred and use of Artificial Insemination (AI) in its breeding program, and establishment of a feedmill.

8.3. ObjectivesGenerally the project aims to strengthen competitiveness of the New

Tumauini Cooperative (NTC) amid the effects of globalization to its operation.

Specifically it aims to:1. provide NTC with state of the art facilities for efficiency and better product

quality;2. provide NTC with starting working capital to fully operate the provided

facilities;3. to empower NTC through capacity building activities such as training/seminar

on cooperative management, piggery management, and resource management; 8.4. Beneficiaries

The direct beneficiaries of the project will be the members of the cooperative from the increased dividends and value of stocks while indirect beneficiaries would be the immediate community where the cooperative market its products because of better quality products at competitive prices. Backward linkages such as input suppliers and forward linkages of the project such as butchers and meat processors shall also benefit from the project.

8.5. LocationThe project shall be located at Barangay Lapogan, Tumauini, Isabela.

8.6. ScopeThe project shall cover a complete technology upscaling of the piggery

operations of the New Tumauini Cooperative that include upgrading of facilities and equipments, upgrading of stocks, and capacity building through training and farm visit.

8.7. Implementation Schedule

Starting Date: Completion Date: Duration: 2 yearsSchedule of Activities

1st Year 2nd Year1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Remarks

Components Activities1. Pre-implementation

Land Survey Architectural plan preparation

Zoning and Building Permit approval

Mayor’s permit, DTI and environmental compliance certificates

2. Building Construction

Construct DeepwellPresent architectural plan to prospective contractorsSelection of contractor with the best price and package offeringCommence building constructionMonitoring building constructionInstall electricity (ISELCO)Purchase and install water system

3. Installation of Equipment

Canvass lowest price of piggery equipmentPurchase equipment and install equipmentTesting of equipment

4. Purchase of Stocks

Canvass price of quality stocks Purchase of stocks and deliveryDo GAP

5. Capacity Building

Attend breeding, artificial insemination and feed formulation trainingConduct trainingConduct farm visit

8.8. Budgetary RequirementsComponents Activities Budget

1. Pre-implementation

Land SurveyArchitectural plan preparation Zoning and Building Permit approvalMayor’s permit, DTI and environmental compliance certificates

2. Building Construction

DeepwellBuilding Breeder Unit Farrowing Unit Nursery Unit Growing/Fattening Unit Bunkhouse and storage room AI House/ Feed mill House 1,700,000.00Water system installation 25,000.00Electricity installation 25,000.00

3. Installation of Equipment

AI Equipments 10,000.00Feedmill equipments 5,000.00Production Equipments 10,000.00

4. Purchase of Stocks

Boar 50,000.00Gilt 360,000.00

5. Capacity Building

Training on AI 2,500.00Training on Feed formulation 2,500.00Cooperative management and resource management training 5,000.00Farm Visit

8.9. Project Analysis

8.9.1. Competitive AspectAs a cooperative of municipal-wide membership, the main competitive

advantage of the NTC is its captured local market. In its current operation, the quantity produced is way low to the demand of the customers even though it can already be considered as one of the biggest piggeries in the locality. Its customer ranges from butchers/meat processors in Tumauini, Cabagan, and its products reaches even the city of Tuguegarao. Although competitive marketwise, NTC production operations still uses the traditional method thus in the aspect of efficiency it still lags behind the competition. Most of the private piggeries in the region with size of operation similar to that of NTC already are using new technologies such as elevated plastic matting for furrowing pen, funnel fan, use of pure breed, artificial insemination, self formulated feeds, and computerized record keeping.

One of the intrinsic competitive advantages of NTC is the support being provided by the Local Government Unit. Being the banner program of the LGU on cooperative development, NTC enjoys financial and structural support from the LGU. Aside from this, NTC is also being managed by a group of competent officers having a Manager with a background in banking being a retired Land Bank of the Philippines (LBP) manager. The members of the Board of Directors (BODs) are known to be successful in their own field ranging from politics to business.

8.9.2. Market Aspect a. Supply and Demand Analysis

1. Production According to a report subtitled Philippine Hog Industry Uptake, in 2008,

Philippine hog production was valued at nearly 150 billion pesos, 11.29 higher than the previous year despite the contraction of 1.60 per cent in the volume of production. The detection of the Ebola Reston Virus (ERV) in two commercial farms in Luzon and outbreak of other swine diseases – as well as the increase in production and feed cost – is expected to affect the growth of the pig industry.

A production data from the Bureau of Agricultural Statistics reveal the following information:

Production (‘000 metric tons liveweight)

2006 2007 20082006 vs.2007

2007 vs.2008

Hogs 1,836.14 1,886.01 1,855.74 2.72 -1.60

The local hog industry accounts for about 85 per cent of the total livestock production and is equivalent to almost 15 per cent of the total value of agricultural production. As of January 2009, the total number of pigs is about 13.6 million head, of which 71 per cent are from backyard farms and 29 per cent are raised by commercial farms. The higher number of pigs can be found in the province of Bulacan with about 1.3 million head, followed by the province of Batangas (0.8 million) and Leyte (0.66 million).

2. ConsumptionTotal pork supply in 2007 reached almost 1.7 million metric tons, of

which 97 per cent are produced locally and the remaining 3 per cent are imported. Demand is mostly for domestic food consumption which is about 98 per cent, and the balance is processed into canned or processed meats. The derived consumption of pork (excluding offal and processed meats) in 2007 was 15.07 kg.

Per Capita Consumption

Of Pork (kg per year)2005 2006 2007

Carcass 13.69 14.80 15.07

Offal 3.03 3.38 3.55

3. Prices Average livestock prices were up by an average of 12.17 per cent, with

hog prices realizing the largest gain at 13.11 per cent. This was mainly due to the drop in hog production and an increase in production cost, specifically feed and fuel costs.

Farmgate Prices (Php per kg

2006 2007 2008

2006vs.

2007

2007Vs.

2008

Hogs 69.23 71.27 80.61 2.95 13.11

The above data are taken from the Bureau of Agricultural Statistics. There is no available official data for the years 2009 and 2010, however, our records show a significant increase in prices in those years, ranging from Php85.00 to Php90.00 in 2009 and Php95.00 to Php100.00 per kg live in 2010. In the early part of 2011, the price even reached Php105.00 per kg liveweight. But it later went down to as low as Php90.00.

c. Demand and Supply Gap Analysis d. Marketing Strategy

The prevailing marketing practice of the New Tumauini Cooperative (NTC) is through direct sales to order buyers (on-farm market sales). This includes wholesale buyers from the municipalities of Ilagan and Cabagan, and local butchers in Tumauini.

In view of the expected increase of production as a consequence of up-scaling swine production operations, The NTC shall introduce marketing strategies to include the following:

1. The NTC shall establish meat shops in strategic places, e.g., in densely populated barangays or cluster of barangays to be managed by interested and capable members.

2. Some members shall be trained in meat processing whose products shall be sold in the established meat shops.

3. Local butchers shall be encouraged to join the NTC by making them aware of the benefits they will derive once they become members such as patronage refund and other services that they can avail from the cooperative.

8.9.3. Technical Aspect a. Farm Site and Layout

The project shall be established in a landholding newly acquired by the cooperative. The site is just about two kilometers away from the national highway and about 100 meters away from the barangay road going to Bgy Lapogan. The site shall be accessible to essential services such as feed suppliers, water, and electricity and electricity sources. The surrounding is suitable for construction of drainage and manure disposal and is amply distant from residential houses and other farms. The NTC shall comply with local government policies on zoning and environmental considerations.

Areas regularly visited by the outsiders shall be situated near the gate such as offices, feed bodega or storage, and finisher pen. A farm road shall be constructed with alleys connecting them. b. Building Design

The project shall adopt a multi-site system consisting of four units housing. These shall correspond to the stages of the pigs’ life cycle. First will be the breeding gestating unit where gilts, sows and boars shall be housed. Bred sows shall stay in this unit until three to seven days before the scheduled farrowing date. Second will be the farrowing unit where the sows ready to give birth are kept until they wean their piglets. Third will be the nursery unit where pigs are raised until they are eight to nine weeks old or until they weigh 10 to 60 kilograms. Fourth will be a growing and finishing where pigs are raised from the time they leave the nursery until they are marketed. In addition to this, another building shall be constructed which shall serve as bunkhouse, storage for feeds and supplies, AI room, feed-milling house.

In the construction of the breeder/gestating, farrowing, nursery and fattener houses, proper building orientation shall be observed to ensure equal distribution of sunlight and ample ventilation.

Housing units shall be open sided to ensure good ventilation, with a monitor-type roofing.

c. Building Cost Estimates 1. Breeding/Gestating Unit 395,000.002. Farrowing Unit 395,000.003. Nursery Unit 395,000.004. Growing/Fattening Unit 395,000.005. Bunkhouse/storage/IA room/feedmilling house 120,000.00

1,700,000.00

d. Tools and equipments needed1. Artificial Insemination - One of the features of this up-scaling project is

the adoption of hand mating through artificial insemination. This technique has the following advantages: 1. more sows can serviced; 2. it eliminates injuries as a result of mating small gilts or sows to large boars; 3. venereal diseases can be controlled; and performance tested boars can still be used when they are incapacitated to perform natural mating. Hence, tools and equipment for this purpose shall be purchased.

2. Feed-milling – Another feature of this up-scaling project is the purchase of feed-milling facilities and equipment to enable the cooperative to manufacture its own feeds and thus reduce cost of production.

3. Production facilities and equipment – Important facilities and equipment to provide protection to the pigs, save labor input and minimize feed wastage and animal losses shall be installed. These shall include farrowing crates and farrowing rails, heat lamp and brooders, creep, breeding crate, feed trough, automatic drinkers (nipples), loading chute, fed cart and scoop and weighing scales. A pressurized water system shall also be installed

b. Labor Costs – The existing labor cost in the locality is Ph150.00 per day.

c. Production Management Practices Management covers all aspects of production, from the point of selection

and purchase of stocks onto marketing. As such, the following general management practices shall be implemented:

1. Only healthy and vigorous stocks shall be purchased to replace aging and culled breeders.

2. All newly acquired stocks shall be quarantined for not less than 30 days and those showing signs of illness shall be isolated immediately. If after such time the animals remain in good condition, allow them to join the resident herd.

3. A herd population which can be properly and effectively managed with existing facilities and managerial skills on the farm.

4. Multi-site system shall be adopted wherein animals shall be grouped according to size, age and function for ease in providing well-balanced rations and to prevent spread of disease that are latent in older animals but are transmitted to young pigs.

5. The animals shall be provided with well-ventilated and comfortable houses. Too hot or too cold conditions, overcrowding and other forms of stress shall be avoided. These conditions lower the resistance of the animals and render them more susceptible to diseases.

6. Proper nutrition for all classes of swine shall be provided at all times to maintain them in healthy condition. The feeding of wrong levels of feed nutrients will seriously affect their performance and may even increase the cost of production.

7. A sound herd health program shall be implemented. An effective immunization and parasitic control program shall be pursued to safeguard the health of the herd.

8. A high level of sanitation shall be maintained. Manure and other wastes shall be drained away from the living and feeding areas. Pens shall be kept thoroughly clean daily and surroundings shall be disinfected after vacating the pen before another batch of animals is brought in. Equipment and facilities that are frequently and interchangeably used between herds/houses shall be properly cleaned, sterilized or disinfected before use. Also, a regular disinfection program shall be done to prevent the micro-organism build up of different diseases.

9. Systematic record-keeping shall be maintained. Aside from keen observation, record keeping shall help in detecting and identifying animals to be culled.

10. All marketable animals shall be disposed immediately. Keeping animals longer than necessary will only decrease profit.

11. Dead animals shall be properly disposed. They may be source of infectious diseases which may cause big losses in the piggery.

12. Caution shall be observed in allowing visitors in the production areas. Disinfecting vats at the entrance of the farm shall be placed.

8.9.4. Financial and Economic Aspect

a. Cost Benefit Analysis

1. Cost of Operating a 100 Sow-fattener Project

Technical Starting Point:

Sow Level 100Litter Index 2Piglets born alive per litter 10Mortality (piglets) 10Weaning age 30 daysWeaning weight 6.5-8.0 kgs.Culling rate 35%Selection rate 80%Reared piglets for fattening 1,800Starting weight 15-20 kgs.Market weight 85-90 kms.No. of fattening days 110-120 daysAverage daily gain 583

Feed consumption Volume CostSow (breeder mash) 92,600 kgs. 2,055,720.00Boar 3,600 79,920.00Replacement stocks 1,056 23,443.00

Piglets (pre-starter) 6,750 182,250.00Weaners 25,829 529,494.00Starter mash 48,240 1,249,416.00Grower mash 183,960 4,451,832.00Fattener 127,800 2,926,620.00

11,498,695.00

Financial Starting Points

Value of Land 280,000.00Buildings

Acquisition Cost 1,700,000.00Salvage Value 170,000.00Lifespan 20 years

Farrowing pens 200,000.00Feed-milling facilities 500,000.00Equipment and farm tools

Weighing scale (1 unit) 25,000.00

Knapsack sprayer (1 pc) 3,000.00Shovels (2 pcs.) 300.00

Brooder (4 pcs.) 6,000.00Feed cart (1 pc.) 750.00

Refrigerator 10,000.00

Veterinary materials 2,000.00Other tools 1,500.00

Total 2,728,550.00Cost of Producing Feeds per/kg.

Pre-starter feed 27.00Starter feed 25.00Grower feed 24.20Finisher feed 22.90Breeder mash 22.20

Price per kgm. liveweight 90.00Existing wage rate 150.00

b. Financial Analysis

Cost of Establishing a 100-Sow Level Fattener Production

Fixed investmentLand 280,000.00

Building 1,700,000.00Farrowing pens 200,000.00Feedmilling facilities 500,000.00Farm Equipment and tools 48,550.00Breeder stocks

Existing Boars and sows 857,886.00Add’l 2 Boars x 25,000.00/head 50,000.00

Add’l 20 Gilts x 18,000.00/head 360,000.00

Sub-total 3,996,436.00

Operating ExpensesCost of Producing Feeds 11,498,695.00Cost of Replacement Stocks 410,000.00Veterinary drugs 115,000.00

Water and Electricity 100,000.00

Salaries and Wages 246,000.00Repair and Maintenance 30,000.00

Sub-total 12,399,695.00

Total 16,396,131.00

c. Economic Analysis

Cost and Return Analysis

Total ReturnCash Return Sales

Fatteners (1800x87x100) 15,660,000.00Culled Sows (35x150x85) 446,250.00

Empty sacks 410,000.00

Total Returns16,516,250.00

Total Cost Per YearCash Cost (Operating Expenses) 12,399,695.00Non-Cash Cost (Depreciation expense)

Buildings 85,000.00Tools and Equipment 75,000.00 Breeders 183,750.00

Interest on Loan 420,000.00

Total Cost 13,163,445.00

Net Income Per Year 3,352,805.00

Rate of Return on Investment (ROI) 20.45%

d. Financial Statements

PROJECTED CASH FLOW STATEMENT

Particulars Year 0 Year 1 Year 2 Year 3

Cash Inflow

LBP Loan 3,500,000.00Owners

Equity 298,550.00Gross

Income 16,516,250.00 17,342,062.00 18,209,165.00Total Cash

Inflow 3,500,000.00 16,814,800.00 17,342,062.00 18,209,165.00Less: Cash

Outflow Buildings/ Equipment 2,448,550.00 Operating Capital 958,225.00 10,540,470.00 13,019,679.00 13,670,662.00 Breeding stocks 410,000.00 378,000.00 430,500.00 378,000.00 Debt Service 1,423,537.50 1,423,537.50 1,423,537.50Total Cash Outflow 3,816,775.00 12,342,007.50 14,873,716.50 15,472,199.50

Net Cash Flow -316,775.00 4,472,792.50 2,468,345.50 2,736,965.50Add:

Beginning Bal. -316,775.00 4,156,017.50 6,624,363.00Cash

Balance -316,775.00 4,156,017.50 6,624,363.00 9,361,328.50

NPV=7,179,958.94IRR=1368%

PROJECTED BALANCE SHEET

Particulars Year 1 Year 2 Year 3Assets      

Buildings, Furniture, Fixtures and Equipments 2,448,550.00

2,288,550.00

2,140,445.00

Cash 3,527,985.40 7,364,049.80 11,413,327.21 Stocks 1,227,639.00 1,227,639.00 1,227,639.00

Total Assets 5,059,824.40 8,862,088.80 12,877,566.21 Liabilities    

Land Bank Loan 1,263,885.40 999,437.05 703,254.90 Total Liabilities 1,263,885.40 999,437.05 703,254.90 Owner's Equity 526,220.00 526,220.00 526,220.00

plus Accumulated Net Income

3,269,719.00

7,336,431.75

11,648,091.31

Total Owners Equity 3,795,939.00 7,862,651.75 12,174,311.31 Total Liabilities &

Owner's Equity 5,059,824.4

0 8,862,088.8

0 12,877,566.2

1

Amortization ScheduleAmount of Loan - 3,500,000.00

S.A. Amortization Interest Principal Balance711,768.75 210,000.00 501,768.75 2,998,231.30711,768.75 179,893.87 531,874.88 2,466,356.50711,768.75 147,981.39 563,787.36 1,902,569.20711,768.75 114,154.15 597,614.60 1,304,954.60711,768.75 78,297.27 633,471.48 671,483.20

711,772.19 40,288.99 671,483.20 -o-

8.9.5. Socio-Economic AspectThe up-scaling of the business operations of the New Tumauini Cooperative is

envisioned to increase its profitability and income. Coupled with sound financial and operational management, the NTC is expected to attain continuing growth and stability, enabling it to give more benefits to members in the form of dividends and patronage refund for those who shall purchase meat and meat products in meat shops proposed to be established. This, in a way, will alleviate the economic status of the cooperative members.

8.9.6. Organization/Management Aspect

Like any other cooperative, the New Tumauini Cooperative has a three-tier organization with the General Assembly at the top, followed by the Board of Directors and officials, and the employees at the bottom. The organizational structure is presented below:

GENERAL ASSEMBLY

Election Committee Board of Directors Audit & InventoryCommittee

Management Staff

Manager

Bookkeeper Cashier Veterinarian Security Guard

Caretakers

Education & Training Committee

Credit Committee

FeedmillOperator